EZA - EZA: Beware Of South Africa's Greylisting And Eskom Crisis

Summary

• South Africa's regional risks continue to rise, with a greylisting adding to the nation's woes.
• Although systemic risks are rife, lucrative regional opportunities exist. However, BlackRock's iShares MSCI South Africa ETF will likely fail to capture such opportunities.
• Considering the systemic environment, the ETF is overly exposed to banking stocks, and its bet on Naspers seems like a coin toss.
• Although the fund's historical performance reveals positive volatility-relative returns, the iShares MSCI South Africa ETF has negative active returns, illustrating a low success rate with its independent bets.
• We consider the ETF a poor investment and reiterate our strong sell rating.

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